Morgan Stanley Remains Sidelined on Endo International plc – Ordinary Shares (ENDP); Here’s Why

Morgan Stanley analyst David Risinger provides insight on shares of Endo International plc – Ordinary Shares (NASDAQ:ENDP), assessing a deeper look into its pipeline businesses for cholesterol drug Zetia and schizophrenia, bipolar disorder, and major depressive disorder-treating drug Seroquel, which the analyst calculates account for $300 million in revenues for 2016.

In light of his research, Risinger reiterates an Equal Weight rating on shares of ENDP, while slighting boosting the price target from $15 to $16, which represents a nearly 23% downside from where the stock is currently trading.

A key risk Risinger outlines for the biotech giant is whether consensus is setting Endo up for an EPS shortfall. The analyst points out, “Ultimately, we believe consensus’ +28% “base” EPS growth in 2018 will be difficult to achieve.”

Though Risinger positively anticipates 25 to 30 launches in the works for 2017 for the firm, he remains critical on the lack of present clarity on the Gx pipeline as ENDP faces a competitive market.

Risinger asserts, “[…] since Endo could face potassium franchise pressure in 2018 and Vastostrict competition in 2019, we lack clarity on late decade growth prospects. Even when we account for previously disclosed FTFs and limited competition launches, these opportunities in aggregate are still difficult to subsidize the Zetia and Seroquel cliff in 2018, in our view.”

In its second-quarter, ENDP did come in with a strong beat. Still, management cautiously maintained its fiscal year guidance, expressing the reason for the beat can be attributed to an earlier $15 to $20 million of planned shipments occurring in the second-quarter, originally expected for third-quarter.

The analyst comments, “Despite this $30-$40M intra-quarter swing, near term growth drivers such as Vasostrict and potassium chloride drive our 3Q estimates towards the higher end of guidance,” anticipating revenues of $866 million, compared to guidance in the range of $830 to $870 million. Risinger forecasts EPS of $0.81 against consensus expectations of $0.77 to $0.82. Moreover, the analyst anticipates revenue for 2016 to hit $4.0 billion and his EPS projection of $4.56 mirrors both the Street and management’s expectations.

“Mgmt appears to have provided conservative near-term guidance, which is a positive. But generics growth beyond first- to-file Zetia and Seroquel remains uncertain, in our view,” he concludes.

As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, one-star analyst David Risinger is ranked #3,197 out of 4,147 analsyts. Risinger has a 47% success rate and faces a loss of 1.4% in his annual returns. However, when recommending ENDP, Risinger earns 6.5% in average profits on the stock.

TipRanks analytics demonstrate ENDP as a Buy. 50% of the analysts polled in the last 3 months rate a Buy on ENDP, while 50% maintain a Hold. The consensus price target stands at $28.89, marking a nearly 40% upside from where the shares last closed.

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